How can blockchain technology optimise Incoterms® 2020?
Dorjee Sun, CEO and co-founder of Perlin, discusses the benefits of blockchain technology for Incoterms®2020 and the future of trade with ICC.
Over the past decade, digital technology and climate change have shaped international trade. Not too many business leaders can say that they have been at the forefront of both these movements.
Dorjee Sun, CEO and co-founder of Perlin, can.
From building his own software company as a university student to forming a carbon trading company for conserving rainforests – Mr Sun has been a driving force behind the digitalisation of trade and the fight against climate change. Now, he’s turning his attention to optimising the Incoterms® rules through blockchain technology.
Listen to ICC’s conversation with Dorjee Sun on the future of the Incoterms® rules.
Entrepreneur and Environmentalist
Mr Sun’s career as an entrepreneur began while he was still a student at the University of New South Wales (UNSW) in Australia. While at UNSW, he founded his first software company with a specific focus on recruitment. Since then, Mr Sun has founded over twenty companies in a wide variety of sectors, including recruitment, education, technology, and environment.
Mr Sun decided to join the fight against climate change 12 years ago by creating his own carbon-trading company, known as Carbon Conservation. As part of this project, Mr Sun raised funds to conserve rainforests around the world by selling carbon credits. “We ended up raising a US$400m. facility to protect rainforests around the world,” explained Mr Sun. “We did some of the first carbon deals with clients, such as Rio Tinto, Bank of America and Merrill Lynch.”
Mr Sun’s commitment to environmental protection attracted the attention of Time Magazine, who named him a Hero of the Environment in 2009. Mr Sun also starred in The Burning Season, a 2008 documentary examining the burning of rainforests in Indonesia.
Despite Carbon Conversation’s success, Mr Sun experienced frustration with the unwillingness of governments to adapt their legislation to protect the environment.“What was fascinating then was when the governments were unable to reach a consensus around what would happen post Kyoto – that was when I started looking at non-governmental instruments: Things, like Bitcoin, blockchain, (and other) decentralized consensus mechanisms,” Mr Sun said.
“So it was from a very centralised initiative such as carbon credits and intergovernmental agreements on climate change that then lead me into blockchain.”
Listen to Bob Ronai discuss the problematic practice of setting prices for the Incoterms® rules, such as FOB, CFR, CPT prices.
In 2018, Mr Sun founded Perlin, a Singapore-based blockchain technology company, to empower businesses and communities around the world.
“Perlin is hoping to become what I believe is a requirement for the future regime. If you think about any type of governance, you need to have some sort of monitoring,” explained Mr Sun. “The power of blockchains is that it uses mathematics and technology and it allows humanity to reach a consensus on a piece of data, without having a central authority dictate to it.”
Perlin’s blockchain technology, known as Wavelet, allows businesses to track data directly on the public ledger. By making this data public through the use of a public ledger, Mr Sun believes that businesses can optimise their operations and supply chains.
“You are able to transcribe that information onto a blockchain – and because it’s public – people know it’s never been tampered with or that it’s not the private database of a company that may have a vested interest to not necessarily have an immutable source of truth.”
In April 2019, Perlin and the International Chamber of Commerce (ICC) signed an agreement to make Perlin’s blockchain available to ICC’s 45 million members in over 100 countries for free. As part of the agreement, ICC and Perlin also announced the creation of the Centre for Future Trade in Singapore, which serves as an innovative hub for blockchain and digital technology initiatives.
“There are all these different emerging areas [in digital technology], and we see Singapore as a very strategic hub to look at this because a lot of the digital adoption is tremendously strong in Asia – we have a very advanced regional community,” said Mr Sun.
Find out what happened to Incoterms 2015, Incoterms 2016, Incoterms, 2017, Incoterms 2018, and Incoterms 2019.
Blockchain and Incoterms ® 2020
With regard to Incoterms® 2020, Mr Sun believes that blockchain technology can help optimise the distribution of the Incoterms rules. In particular, Mr Sun sees blockchain technology as a way to reduce the Incoterms rules reliance upon paper.“Given blockchain’s sensor technology [through the use] of sensors and drones, surely there’s a way we can start reducing the paper load,” he said.
Blockchain technology also has the capacity to reduce errors or misinterpretations of the Incoterms® rules. “I’ve actually seen internal documentation from some of the big trade companies showing literally tens of thousands of emails being traded just to coordinate,” said Mr Sun. “If we could digitalise, we could improve this process and make it more efficient.”
In the future, Mr Sun envisions the Incoterms® rules as self-executing contracts. These contracts, known as “smart contracts” would seamlessly execute the correct Incoterms® rule for parties involved in trade with one another, according to Mr Sun.
Incoterms 2020® will launch in early September 2019. Learn more about the Incoterms® 2020 Mobile Application and Incoterms® 2020 Training Sessions.
Through Perlin’s blockchain ledger, companies of all sizes, including micro, small and medium enterprises (MSMEs) will have the ability to optimise their supply chains and reduce costs. “There are all these ways to automate and reduce cost, which is going to make things much more accessible,” explained Mr Sun.
For Mr Sun, the benefits of blockchain technology and data are not just limited to the Incoterms® rules. “If you imagine a world in 10 years’ time with sensors, nanosatellites, drones, with all forms of data collection and that data to be in the blockchain, so it’s immutable, then the future should be continuous multi-dimensional data, using AI and algorithms,” said Mr Sun. “By harnessing data and digital technology, the global trade system can resolve pressing challenges, like climate change.”
“The main mission is to think about how we bring some form of truth and realistic planning and how we use trade as becoming the anchor point for a sustainable world.”
Find out more about ICC and Perlin’s partnership.
Discover the latest updates on Incoterms® 2020, including training sessions and the digital app.
Special thanks to Anis Anghel for transcribing this interview and Jeff Dombrowski for creating the cover art for A Day in the Life of the Incoterms® Rules.